Carmakers' bailout faces tough Senate challenge

The bailout for US car manufacturers faces a tough challenge in the Senate after the House of Representatives approved a 14-billion-dollar rescue plan. Strong Republican opposition threatens to derail the legislation.

AFP - The House of Representatives approved a 14-billion-dollar government lifeline for the teetering US auto industry, but the proposal now faces stiff Republican opposition in the Senate.

The plan passed 237 to 170 late on Wednesday following several hours of intense debate, and after senior Democrats in Congress and the White House hammered out a bridge loan deal to rescue the Big Three automakers.

The bill now moves to the Senate, where strong Republican opposition in a chamber with a razor-thin Democratic majority threatens to derail the legislation.

The rescue funds for the bailout are to be drawn from a loan program set up previously to bankroll the development of fuel-efficient cars.

The initial plan called for up to 15 billion dollars (11.4 billion euros) but in the end lawmakers chose to leave some funds remaining in the loan program for use by smaller companies, US media reported.

At the end of floor debate, House Speaker Nancy Pelosi said the legislation would serve as "a jumpstart for an industry and our country's economic health."

The bill "sets us on a new path to viability. It is a test. And we will soon see in a matter of weeks if the executive suites in Detroit are willing to make the choices" laid out in the legislation.

"We want to throw a lifeline for success. We do not intend to afford life support," she said, warning that auto industry bankruptcy would send US manufacturing "down into a deep pit."

In the most far-reaching intervention in US industry in years, The Auto Industry Financing and Restructuring Act calls for emergency government loans to the car companies within days to be overseen by a "car czar" appointed by outgoing President George W. Bush.

In return, automakers by March 31 would have to cut costs, settle debts and make other changes to show a path to profitability or face possible bankruptcy.

The government could choose to revoke the loans if the companies fail to make progress, or could refuse further assistance after March 31 if the Big Three have no promising survival plan, officials said.

House Majority Leader Steny Hoyer said it was critical that the government bailout proceed.

"There is a great reluctance to directly assist carmakers," he said, stressing that "the impact on the economy would be very severe" if the industry collapsed.

"If we do nothing, we face the real threat that sometime soon there will be no American auto industry," he said during the House debate.

The White House hailed the vote Wednesday night, with spokeswoman Dana Perino calling the bill "an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs."

But there were serious doubts voiced by Republicans, who warned the intervention was doomed and would only postpone a day of reckoning for the car companies and autoworkers' union.

Republican Representative Tom Feeney slammed it as a "short-term solution" that would merely drain federal coffers and strain taxpayers.

"Micro-managing a business from Washington is the supreme act of hubris. It will never work," he said on the House floor.

Republican Senator Richard Shelby of Alabama agreed.

"I'm going to oppose the package because I think this is just the down payment on billions and billions to come," he said. "These are failed or failing companies."

Influential House Financial Services Committee Chairman Barney Frank, one of the bill's architects, acknowledged the extent of opposition in the Senate, where Democrats currently have only 49 seats, plus two Independents who usually vote with them.

To overcome that opposition and pass the auto bill Democrats need at least 60 votes.

Republican Senate Majority Leader Mitch McConnell said Wednesday the rescue bill would be considered by the Senate by the end of the week.

The proposed short-term loans are meant to sustain the car giants through March, allowing president-elect Barack Obama time to address the crisis after he takes office on January 20.

GM and Chrysler are first in line, after warning they are fast running out of cash. Ford, though equally hampered by slumping sales, says it faces no immediate liquidity crisis but wants a nine-billion-dollar line of credit.

The auto giants had initially asked for more than twice as much -- 34 billion dollars -- to stave off a "catastrophic collapse."